Dear Members,
Your Directors have pleasure in presenting their 15th Annual Report on
business and operations along with the Audited financial statements and the Auditor's
report of the Company for the financial year ended 31st March, 2023.
Financial Highlights:
(Amount in Rs. Crores)
Particulars |
Coffee Day Enterprises Limited |
Coffee Day Enterprises Limited |
Coffee Day Global Limited |
Coffee Day Global Limited |
|
(Consolidated) |
(Consolidated) |
(Consolidated) |
(Consolidated) |
|
FY 23 |
FY 22 |
FY 23 |
FY 22 |
Net Operational Revenue |
924 |
582 |
869 |
496 |
Finance charges |
87 |
53 |
63 |
34 |
Depreciation |
161 |
148 |
157 |
143 |
Profit/(Loss) Before Tax |
(382) |
(128) |
(63) |
(111) |
Income Tax |
5 |
3 |
4.38 |
- |
Total Profit/ (Loss) attributable to the Owners of the Company. |
(380) |
(121) |
(67.77) |
(113) |
Note: Pending Resolution of one-time settlement with lenders the Company and it's
subsidiaries have not recognised interest on borrowings to the extent of Rs 168/ Crores (
previous year Rs 185 /Crores).
Performance Overview
During the fiscal year ended 31st March 2023, Net revenues increased by 59% to Rs.924
Crores in FY 2022-23, compared with Rs.582 Crores reported in FY 2021-22.
The Consolidated net Loss for the year under review attributable to shareholders of the
company stood at Rs.380 Crores compared with Loss of Rs.121 Crores in the previous
financial year. The loss during FY 22-23 is mainly due to write-off of balances due from
Sical Logistics Limited to the Company and its' subsidiaries of Rs.392 crores as per the
order dated 8th December 2022 of NCLT, Chennai.
State of The Company's Affairs
The state of the Company affairs forms an integral part of Management Discussion &
Analysis Report.
Dividend
The Board of Directors of the Company has not recommended any dividend for the
financial year 2022-23.
Transfer to Reserves:
In accordance to the provisions of Section 134(3)(j) of the Companies Act, 2013,
(hereinafter the Act) the Company has not proposed any amount to transfer to
the General reserves of the Company for the financial year 2022-23.
Deposits:
The Company has not accepted any Deposits under Section 73 and Chapter V of the Act and
the rules made thereunder.
Particulars of Loans, Guarantees or Investments:
The details of the loans, guarantees and investments are provided in the notes to the
audited financial statements annexed with the Annual report.
Subsidiaries, Joint Ventures and Associate Companies:
As on 31st March, 2023, the Company has 17 subsidiaries (including step-down
subsidiaries), 4 Associate Companies and 3 Joint Ventures. The details of the Companies
which are yet to commence operations and which have been liquidated or sold during the
year are mentioned in Form AOC-1, which is attached as an Annexure
VII. A statement containing the salient features of the financial statements of
Subsidiaries, Associate Companies or Joint Ventures are mentioned specifically in the same
annexure as mentioned above. In accordance with Section 136(1) of the Act, the financial
statements of the subsidiaries companies are available on the Company's official website
post approval of the members.
In line with Regulation 24 and Regulation 46(2)(h) of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015, (hereinafter the Listing
Regulations) the Company has formulated a detailed policy for determining
material' subsidiaries and the said policy is available at the Company's official
website and may be accessed at the link :
https://coffeeday.com/Stakeholders/Policies/Material Subsidiary.pdf
Management Discussion & Analysis Report:
As stated in Regulation 34(2)(e) of the Listing Regulations, the Annual Report shall
contain a detailed report on Management Discussion & Analysis, which is hereto
attached with the Annual report in Annexure-I.
Corporate Governance:
The report on Corporate Governance along with a Certificate from the Practicing Company
Secretary regarding proper compliance of Corporate Governance pursuant to the requirements
of Schedule V of the Listing Regulations forms an integral part of the Annual Report
stated in Annexure-II.
Dividend Distribution Policy:
In accordance with Regulation 43A of the SEBI (Listing Obligations and Disclosure
Requirements) (Second Amendment) Regulations, 2016, the Board of the Company has adopted
Dividend Distribution policy in their meeting held on 18th May, 2017, which aims at
marking the right balance between the quantum of dividend paid to its shareholders and the
amount of profit retained for its commercial requirements. The said policy is available in
the website of the company.
Board Diversity:
The Company recognizes and embraces the importance of diverse Board in its success. We
believe that a truly diverse board will leverage differences in thought, perspective,
knowledge, industry experience that will help us retain our competitive strength. The
Company has evaluated the policy with a purpose to ensure adequate diversity in Board of
Directors, which enables them to function efficiently and foster differentiated thought
processes at the back of varied industrial and management expertise. The Board recognises
the importance of a diverse composition and has therefore adopted a Board Diversity
Policy. The policy is made available at the Company's official website via
link:https://www.coffeeday.com/PDF/BOARD%20DIVERSITY%20POLICY.pdf the directors have laid
down the internal controls based on the internal controls framework established by the
Company, which in all material respects were operating effectively as at March 31, 2023.
The Directors had devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems were adequate. The Company has
substantially complied with material provisions of such acts and regulations as are
relevant for its operations.
Declaration by Independent Directors:
All the Independent Directors have given their declarations stating that they meet the
criteria of independence as laid down under Section 149(6) of the Act read with Regulation
16(1)(b) of the Listing Regulations. In the opinion of the Board, they fulfil the
conditions of independence as specified in the Act and the Listing Regulations and are
independent of the management.
Committees of the Board:
The Company has four main Committees of the Board i.e.:
(a.) Audit Committee,
(b.) Nomination and Remuneration Committee and,
(c.) Stakeholder's Relationship Committee.
(d.) Corporate Social Responsibility.
The detailed information on each of these committees including its composition,
functioning and number of meetings are disclosed in the Corporate Governance report
annexed with the Annual report of the Company.
Meetings of the Board:
During the financial year 2022-23, the meetings of the Board of Directors were held six
(6) times. Details of these meetings and other Committee/General meetings are given in the
report on Corporate Governance Report attached with the Annual report.
Particulars of Contracts/arrangements with related parties:
All the repetitive Related Party Transactions that were entered into during the FY
2022-23 were on an arm's length basis and in the ordinary course of business. There were
no materially significant Related Party Transactions made by the Company during the year
that required shareholders' approval under Regulation 23 of the Listing Regulations. Prior
omnibus approval from the Audit Committee is obtained for transactions which are
repetitive in nature. Further, disclosures are made to the Committee on a quarterly basis.
Further, Particulars of contracts or arrangements with related parties referred to in
sub-section (1) of section 188 in the Form AOC-2 have been enclosed as Annexure-VIII
pursuant to clause (h) of subsection (3) of Section 134 of Companies Act, 2013 read with
Rule 8(2) of the Companies (Accounts) Rules 2014.
The Company has adopted a Policy for dealing with Related Party Transactions and is
made available on the Company's official website via web link: https://www.cotfeeday.com/PDF/RPT%20PQLICY.pdf
Material changes and commitment - if any, affecting the financial position of the
Company from the end of the financial year till the date of this Report:
There has been no material change and commitment, affecting the financial performance
of the Company which has occurred from the end of the financial year of the Company to
which the financial statements relate to till the date of this report.
Change in nature of business:
There has been no change in the nature of business of the Company.
Conservation of Energy, Research and Development, Technology absorption, Foreign
Exchange Earnings & Outgo:
The information on conservation of energy, technology absorption and foreign exchange
earnings and outgo stipulated under Section 134(3) (m) of the Act read with Rule 8 of the
Companies (Accounts) Rules, 2014 is provided in Annexure-III to this Annual
report.
AUDITORS:
a) Statutory Auditors:
Members of the Company have appointed M/s. Venkatesh & Co., Chartered Accountants,
as Statutory Auditors of the company for the period of 5 years from the Conclusion of 12th
Annual General Meeting till the conclusion of 17th Annual General Meeting which
will fall in the year 2025 in their 12th Annual General Meeting held on 31st
December 2020.
b) Secretarial Auditor:
In accordance with Section 204 of the Act and the rules made there under, the Company
has appointed M/s G. Akshay & Associates, Practising Company Secretaries, Bangalore to
undertake the Secretarial Audit of the Company for the financial year ended 31st March,
2023. The Secretarial Audit report issued in this regard is attached as
Annexure-IV (including Secretarial Audit Reports of Coffee Day Global
Limited, Coffee Day Trading Limited and Tanglin Developments Limited).
c) Cost Auditor:
In terms of the provisions of Section 148 of the Act, the appointment of the Cost
Auditors does not apply to the Company.
d) Internal Auditor:
Pursuant to the provisions of Section 138 of the Act read with the Companies (Accounts)
Rules, 2014, the Company has appointed M/s A B S & Co., Chartered Accountants as
Internal Auditors of the Company.
Significant and material orders passed by the Courts/Regulators:
During the year under report there were no significant and material orders
passed/notices served by Courts/Regulators except the following
1. Non-disclosure of certain pledge and un-pledge of shares of Mindtree Ltd under
SAST regulations. The Company has opted for adjudication process and filed its objection
for the notice. After giving an opportunity to the companies to be heard, the adjudicating
officer vide the order dated 28th June 2022, imposed the penalty of Rs. One
Lakh each to the Company and Coffee Day Trading Limited under section 15A(b) of SEBI Act,
for the failure on their part to comply with the provisions of Regulation 29 (2) r/w
Regulation 29(3) & 29(4) of SEBI (SAST) Regulations, 2011
2. the SEBI vide its adjudication order dated January 24, 2023, inter-alia, directed
the Company to take necessary steps to recover dues from Mysore Amalgamated Coffee Estates
Limited and its related entities, along with due interest, that are outstanding to the
subsidiaries of the Company. Further, SEBI has directed the Company to appoint an
Independent Law firm in consultation with NSE within 60 days of this order, to take
effective steps for recovery of dues and imposed a penalty of Rs. 25 Crores under section
15HA and Rs. 1 crore under section 15HB of the SEBI Act, 1992. Further the Company has
appealed the order of SEBI to appellate Authority, then the stay has been granted on the
imposition of penalty of Rs. 26 crores.
Extract of Annual Return:
An extract of the Annual return in form MGT-9 in compliance with Section 92 of the
Companies Act, 2013 read with applicable rules made thereunder is annexed as
Annexure-V and is placed on the website www.coffeeday.com
Business Responsibility & Sustainability Report:
The Regulation 34(2)(f) of the Listing Regulations, which pertains to report on Business
Responsibility & Sustainability is not applicable to current reporting period, as
the Company is not under top one thousand companies based on market capitalization as on
31st March 2023.(Under BSE and NSE, the Company stands on 1093 and 1158
ranks respectively)
Secretarial Standards:
The Company complies with all Secretarial Standards issued by Institute of Company
Secretaries of India. Internal Financial Control (IFC) and its Adequacy:
The Internal Controls of the Company operate through well documented standard policies
and guidelines. The Company has adequate internal financial control procedures
commensurate with its size and nature of business, which helps in ensuring orderly and
efficient conduct of its business. This system provide a reasonable assurance of financial
and operational information, complying with applicable statutes, safeguarding of assets of
the Company, prevention and detection of frauds, accuracy and completeness of accounting
records and ensuring compliance with corporate policies.
Exceptions if any are reported under Explanatory Notes of Management for
each financial quarter.
All the significant internal audit observations and management actions thereon are
reported to Audit Committee on a quarterly basis. The Audit Committee reviews the
operations and assesses the adequacy of the actions proposed as well as monitors their
implementation. The internal auditors conduct a quarterly follow-up for implementation of
all audit recommendations and the status report is presented to the Audit Committee
regularly.
The Company's management has assessed the effectiveness of the internal control over
financial reporting for the year ended 31st March, 2023 and based on the assessment;
believe that the system is working effectively. The Statutory Auditors have issued a
report on the adequacy and effectiveness of the internal control systems over financial
reporting.
Whistle Blower Policy/Vigil Mechanism:
As per the requirements laid down under Section 177(9) of the Act and Regulation 22 of
the Listing Regulations, the Company has established the Whistle blower Policy which
encourages Directors and employees to bring to the Company's attention, instances of
unethical behaviour, actual or suspected incidents of fraud or violation of the Company's
Code of Conduct that could adversely impact on Company's operations and business. The
Policy provides that the Company investigates such incidents, when reported, in an
impartial manner and takes appropriate action to ensure that requisite standards of
professional and ethical conduct are always upheld. The practice of the Whistle blower
Policy is overseen by the Audit Committee and no employee has been denied access to the
Committee.
The Contact details of Chairman of Audit committee as under:
Name: Mr. K. R. Mohan
43 New No.22, 1st Floor 16th Cross,
8 th Main, Malleswaram Bangalore Karnataka 560055 Cell No.: 9844152676 Email
id:kr_mohan@hotmail.com
The Whistle Blower Policy is available on the Company's official website and may be
accessed through web link: https://coffeeday.com/PDF/WhistleBlower.pdf
Particulars of Employees:
As stated in provisions of Section 197(12) of the Act read with Rule 5(2) and 5(3) of
the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as
amended from time to time, a statement showing the names and other particulars of the
employees drawing remuneration in excess of the
limits set out in the said rules which includes the name of top 10 employees in terms
of remuneration, forms part of this annual report. Pursuant to the provisions of Section
136(1) of the Act, the Board report is being sent to the shareholders including the said
statement.
Disclosure pertaining to the remuneration as required under Section 197(12) of the Act
read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 is provided in Annexure-VI.
Corporate Social Responsibility (CSR):
Pursuant to the provisions of Section 135 of the Act read with the Companies (Corporate
Social Responsibility Policy) Rules, 2014, and on the recommendations of the CSR Committee
comprising of Mr. S.V. Ranganath as the Chairman and Mrs. Malavika Hegde and Mr. K.R.
Mohan as Members, the CSR policy is adopted and approved by the Board of the Company. The
said policy has been hosted on the Company's website and is available on the link:
https://coffeeday.com/Stakeholders/Policies/CSR-Policy-CDEL.pdf it lays down the purpose
of formulation of the policy, areas of focus, composition of Committee and CSR budget.
During the year under Report, the Company is not required to spend any amount on CSR
activities.
Green Initiatives:
In commitment to keep in line with the Green Initiative and going beyond to it,
electronic copy of the Notice of 15th Annual General Meeting along with Annual Report of
the Company are sent to all Members whose email addresses are registered with the
Company/Depository Participant(s).
Prohibition and Redressal of Sexual Harassment at Work place:
The Company has zero tolerance for sexual harassment at workplace and has adopted a
Policy on Prevention, Prohibition and Redressal of Sexual Harassment at workplace in line
with the provisions of the Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013 and the rules made thereunder. The Policy aims to
promote a healthy work environment and to provide protection to employees at workplace and
redress complaints of sexual harassment and related matters thereto. The Company has also
constituted an Internal Complaints Committee, known as the Prevention of Sexual Harassment
(POSH) Committee, to enquire into complaints of sexual harassment and recommend
appropriate action.
Following are the Internal Complaints Committee members.
1. Ms. Bhavna Halappa - Presiding Officer
2. Ms. Arundhati Mukoo - Internal member
3. Mrs. G. Vanajakshi N - External Member
During the financial year 2022-23, the Company has not received any complaints on
sexual harassment.
BOARD'S RESPONSE ON AUDITORS' QUALIFICATION, RESERVATION OR ADVERSE REMARK OR
DISCLAIMER MADE:
A. Audit Qualification
I. Following are the Disclaimers/Emphasis of matter/qualifications given in the Consolidated
Independent Auditors Report for the quarter/year ended 31st March 2023 and
management response for the same.
1. Disclaimer of opinion has been expressed in the reports of the Parent Company with
regard to the preparation of financial statements. It is observed that there has been a
change in the percentage of shares held by the Company in two of its subsidiaries as of
March 31, 2023 vis-a-vis March 31, 2019, due to the invocation of shares by the lenders of
the subsidiaries. However, while considering the amount invested in the subsidiaries, the
Management of the Company has considered the erstwhile shareholding pattern prior to
dilution as the Management believes that the change in shareholding is temporary in nature
and the shares pledged will be redeemed back by the Company (refer to Note 61 of the
consolidated financial statements). However, these shares have been transferred to such
lenders before March 31, 2023. We have been informed that the lenders have not sold any of
the shares invoked and consequently have not made any adjustments to the loan outstanding.
Accordingly, the Management believes that it is not possible to attribute any sale value
to the invoked shares.
Consequently, the impact of the said transfer on the book value of invoked shares in
the Consolidated financial statements cannot be ascertained.
Further, the impact of the aforesaid on the consolidated financial statement, including
but not limited to the profit attributable to the non-controlling interest in the Company,
cannot be ascertained. Accordingly, the level of compliance to the requirements of the
Indian Accounting Standards cannot be ascertained by us.
Reply: Management believes that the change in shareholding is temporary in nature
and the shares pledged will be released back to the Company. Since there is no
marketability for the shares invoked management is unable to estimate the impact.
2. In respect of parent company and some of the subsidiaries, attention is drawn to
Note 23, Note 23A, Note 29 and Note 57 of the Consolidated financial statements, wherein
instances of non-compliance with certain debt covenants including interest & principal
repayment defaults have been described. We also draw attention to the fact that the
Company has not obtained the balance confirmations on loans from lenders. In the absence
of adequate and sufficient audit evidence to establish the amounts payable to the lenders,
we are unable to provide our opinion on the correctness of these amounts reflected in the
consolidated financial statement and also on their consequential impact including
potential tax liabilities. We have been informed that during the year certain lenders have
exercised their right to recall the loan and some lenders have initiated legal action to
recover dues. However, in the absence of the adequate evidence, we are unable to comment
on the consequential adjustments that might impact this Statement on account of
non-compliance with debt covenants.
Further, in view of the loan recall notices, legal disputes and pending one-time
settlement with the lenders of the group, the parent company, three subsidiaries and one
step down subsidiary has not recognised interest on the loans outstanding as of March 31,
2023 aggregated to INR 185.51 Crores. As the loan recall letters provided by the lenders
requires payment of interest, penal interest, non-provision of such interest is not in
line with the accrual concept of accounting.
Further, We have issued a disclaimer of opinion due to non-provision of interest in the
parent company, 2 subsidiary and 1 step down subsidiary and the auditor of 1 subsidiary
has emphasised the same, reliance is placed on the books of accounts provided by the
Management.
Further We draw Attention to Note 65 of the statement wherein we have issued a
disclaimer of opinion due to non-availability of appropriate evidence, confirmation of
balances and statement of accounts with regard to borrowings from certain lenders in 2
subsidiary and 1 stepdown subsidiary.
Reply: The Group has borrowings amounting to Rs. 1711 crores as at 31 March 2023.
There have been certain covenant breaches with respect to certain borrowings taken by the
group from various lenders. Such breaches entitle the lenders to recall the loan. On the
date of this statement, there have been certain defaults in repayments of principal and
interest of the loans and certain lenders have exercised their rights including recall the
loans. In view of the loan recall notices, legal disputes and pending onetime settlement
with the lenders of the Group, the Group has not recognized interest.
3. Attention is drawn to Note 70 of this statement wherein a final adjudication
order dated 24.01.2023 has been served on the company under section 11 (11(4), 11(4A), 11B
and 11B ( of the Securities and Exchange Board of India Act, 1992 read with Rule 5 of SEBI
(Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 by SEBI imposed with a
total monetary penalty of Rs.26,00,00,000 (Rupees Twenty-Six Crore) under Section 15HA and
Section 15HB of the SEBI Act, 1992 respectively on account of violations of provisions of
Section 12A(a), (b) & (c) of the SEBI Act, 1992 read with Regulations 3(b), (c) &
(d) and 4(1) of the PFUTP Regulations as stated in Para 59 and 60 of its order relating to
the advances to MACEL by the subsidiaries of the Company and in respect of which no
provision for the liability has been considered in the accounts.
The order further directed the company to appoint a law firm, of standing and repute,
within 60 days of the order to take all necessary steps for recovery of entire dues from
MACEL and its related entities, along with due interest, that are outstanding to the
subsidiaries. SEBI further directed the company to file a quarterly report with NSE / CDEL
Board, detailing the progress in the recovery process.
The tenure of the law firm appointed in terms of sub-para (b) above shall be until the
lapse of three months from the date of conclusion of three annual general meetings of
CDEL, held after passing of this order or till the dues are recovered, whichever is
earlier.
The company appealed against the above order dated 24th January 2023 to the Hon'ble
Securities Appellate Tribunal (SAT) which granted stay only on the imposition of penalty.
Further, we have issued a disclaimer of opinion due to the possible impact of the
recoverability of dues from MACEL in 1 subsidiary, which in turn has 3 step-down
subsidiaries and 2 joint ventures, and in 2 subsidiaries and 2 step-down subsidiaries,
based on above.
Further, the auditor of 1 subsidiary has issued a disclaimer of opinion due to the
possible impact of the recoverability of dues based on their review.
Reply: the Company appealed the above order dated 24th January 2023 to the Hon'ble
Securities Appellate Tribunal (SAT). However, the SAT granted stay on imposition of
penalty.
As per the instructions of NSE the Company appointed Independent Law Firm Crest Law on
3rd April 2023 to take effective steps for recovery of dues from MACEL.
Under the above circumstances, no provision is made in the Books of Accounts against
the amount receivable from MACEL.
As on 31.03.2023 the amount due by MACEL to various subsidiaries and joint venture of
the company amounts Rs.3,419.84 crores.
4. The Group has Goodwill of INR 361 Crore arising on consolidation (Refer Note 6 of
the consolidated financial statement) In view of the developments during the period,
including the investigation report submitted to the company. The last drawn valuation
report provided to us by the Company was dated March 31, 2019, the Group is required to
assess the said asset for impairment as required by Ind AS 36, Impairment of
Assets'. However, the same is pending as of March 31, 2023. In the absence of a valuation
report, we are unable to comment on whether any provisions on account of impairment is
required and the consequential impact of the same on this statement.
Reply: The assessment of impairment, if any, remains to be done.
5. We have issued a disclaimer of opinion in 2 subsidiaries and 1 step down
subsidiary due to doubts on the recoverability of dues from three parties aggregating to
INR 245 Crore (refer to Note 18 of the Statement).
Reply: After reviewing recoverability of the advance, in FY 2019-20, the
subsidiaries of the company have created provision Supplier advance and doubtful debts
amount to Rs.245 crores. However the efforts for the recovery will continue.
6. We being the auditors of 1 subsidiary company have also highlighted
non-compliance to the Indian Accounting Standards governing Investment Property, on the
grounds that the subject properties have not been valued in with the methodology
prescribed under the applicable Accounting Standard, but as per the value prescribed by
the Government of Karnataka (refer to Note 5(c) of the Statement).
Reply: There is no impact on the financials however the company could not disclose
certain details as required under IND AS.
7. We have issued a disclaimer of opinion due to doubts on the recoverability of
dues from advanced as capital advances to one related party aggregating to INR 275 Crore
(refer to Note 13 of the Statement).
Reply: An agreement for purchase of land at Mumbai had been entered into by the
Tanglin Developments Limited (subsidiary) with Mrs.Vasanthi Hegde in FY 2017-18. Based on
agreement to purchase the land the Tanglin Developments Limited (subsidiary) has advanced
Rs.27,500 Lakhs to Mrs.Vasanthi Hegde. The land in the name of Mrs.Vasanthi Hegde has been
acquired by City & Industrial Development Corporation (CIDCO) nodal agency for
acquiring land for Navi Mumbai
International Airport. CIDCO has proposed alternative land in lieu of the acquisition
of land. However Mrs.Vasanthi Hegde has filed legal case for monetary compensation instead
of alternate land.
8. The Consolidated Financial Statements of the Group have been prepared by the
Management and Board of Directors using the going concern assumption. The matters detailed
in the above paragraphs may have a consequential implication on the Group's ability to
continue as a going concern (refer to Note 59 of the Consolidated financial Statements).
Further, the material uncertainty over using the Going Concern assumption has also been
established by several other component auditors of the Group, as well. However, the Group
is confident of meeting its obligations in the normal course of business and accordingly
the accounts of the Group have been prepared on a Going Concern Basis.
Further, We have expressed that there is a material uncertainty on going concern in 2
subsidiary, 3 step down subsidiaries and the auditors of the 1 Subsidiary and 2 Step down
subsidiaries have also expressed the same in their reports.
Reply: These consolidated financial results for the quarter and year ended 31 March
2023 have been prepared on a going concern basis in view of the positive net worth of the
Group amounting to Rs 3,376 crores as of 31 March 2023, significant value in underlying
businesses managed by subsidiaries / joint ventures / associates, established track record
of the Group to monetize its assets as demonstrated by stake sale in Mindtree Limited ,
sale of Global Village Tech Park owned by its wholly-owned subsidiary Tanglin Developments
Limited, sale of Way2Wealth Group entities, operational efficiencies and consequential
ability to service its obligations.
Emphasis of Matter
9. We draw attention to the Note 60 of the Statement, wherein the Company has stated
that Corporate Insolvency Resolution Process has been initiated in NCLT against one of its
key step-subsidiary, M/s. SICAL Logistics Limited (SLL), pursuant to which a final
resolution plan has been received vide order dated 08.12.2022. As per the said order read
with the approved Resolution Plan, Nil payment is payable against the amounts
due to related parties of SICAL. the group has written off the amount due from SLL &
its group entities of Rs.391.68 crores. As per the NCLT order the equity shares held by
the Promoter and Promoter group is extinguished and cancelled. Accordingly the investment
in SLL, which is valued based FVTOCI at Rs 7.45 crores, held by 2 step-down subsidiaries
as promoters, is fully written off.
Reply: Impact already considered in Financial statements, the auditors have
emphasized a factual matter.
10. The Parent Company along with 1 of its subsidiary has entered into an Agreement to
sell Way2Wealth Securities Private Limited and its certain subsidiaries to Shriram
Ownership Trust (the purchaser') (refer Note 47(ii) of the Statement). Based on the
agreement, INR 12.10 Crore is receivable by the company in form of preceding year's tax
refunds and SEBI deposits from the purchaser in form of reimbursement, subject to
realisation. Further a sum of INR 2 Crore has been withheld by the purchaser per the
agreement. An exceptional profit of INR 15.51 Crore has been recognised in the year
2020-21 on the said sale transaction at the Group level.
Reply: The auditors have emphasized a factual matter. The above are as per
agreement with the party.
11. We draw attention in One subsidiary wherein (refer to Note 44 F of the Statement)
the outstanding income tax dues of INR 110.3 crores relating to for AY 2019-20 and AY
2020-21.
Reply: Impact already considered in Financial statements, the auditors have
emphasized a factual matter.
12. We draw attention to the details of cases filed against the 1 Subsidiary before
NCLT (refer Note 45 of the Statement) which was subsequently dismissed.
Reply: The National Company Law Tribunal (NCLT) had dismissed the application by
one of the lenders of Coffee Day Global Limited (subsidiary) as a financial creditor for
recovery of its dues in the previous quarter. The lender filed an application in NCLAT,
appealing against the order.
Another lender, who is a financial creditor of Coffee Day Global Limited (subsidiary),
has filed an application with NCLT for recovery of its dues, during the year.
13. We also highlighted that the Company (refer to Note 58 of the statement) is
required to be registered under section 45-IA of the Reserve Bank of India Act, 1934
pertaining to year 2019-20 and has sought a one-time exemption of the same and response
from the Reserve Bank of India (RBI) is awaited.
Reply: The Company has applied one time exemption from NBFC provisions to RBI and
company is awaiting response from RBI.
14. We draw attention to the liquidation process of the foreign subsidiaries of 1
subsidiary, which in turn has 3 step-down subsidiaries and 2 joint ventures (refer Note 47
(I) of the Consolidated financial statements).
Reply: The foreign operating subsidiaries of Coffee Day Global Limited (subsidiary)
went into liquidation and accordingly the discontinued operations for the period is nil.
However the Coffee Day Global Limited (subsidiary) does not have any additional liability
in respect of these limited liability corporations. Further 100% provision in respect of
investment in these foreign subsidiaries have already been made, and accordingly there is
no further impact on the financial statements of Coffee Day Global Limited (subsidiary).
15. We draw attention to Sale of immovable property and accordingly the profit on
sale of such asset has been recognised under other income (refer Note 68 of the Statement)
in 2 subsidiaries.
Reply: The auditor has emphasized a factual matter for which the impact has been
addressed in financials.
16. We have emphasized in 1 subsidiary, which in turn has 3 step-down subsidiaries
and 2 joint ventures on recognising the earlier deferred tax asset without doing for the
current year evaluations. (Refer to Note 71 of the statement)
Reply: The auditor has emphasized a factual matter for which the impact has been
addressed in financials.
17. We have emphasized on the obsolete or unusable assets pertaining to closed cafes
and fully depreciated such assets to the tune of Rs.19.00 Crores in 1 subsidiary, which in
turn has 3 step-down subsidiaries and 2 joint ventures. (refer Note 67 of the Statement).
Reply: The auditor has emphasized a factual matter for which the impact has been
addressed in financials
II. Following are the Disclaimers/Emphasis of matter/qualifications given in the Standalone
Independent Auditors Report for the quarter/year ended 31st March 2023 and
management response for the same.
1. We have not been provided with sufficient evidence with respect to recoverability of
dues from group companies amounting to INR 1,657 Crores (refer Note 7B of the standalone
financial statement). Further, we have not been provided appropriate evidence about the
recognition of fair value of the estimated loss allowance on corporate guarantee given to
its subsidiary as required by Ind AS 109, Financial Instruments'. We are therefore
unable to comment on the recoverability of the stated balance from group companies, fair
value of estimated loss allowance on corporate guarantee given to a subsidiary, and the
impact on the standalone financial statement.
Reply: The subsidiaries of CDEL are in the process of disinvestment of their
assets. The company is confident that the subsidiaries will repay these advances in due
course.
2. It is observed that there has been a change in the percentage of shares held by the
Company in two of its subsidiaries as of March 31, 2023, vis-a-vis March 31, 2019, due to
the invocation of shares by the lenders of the subsidiaries. However, while considering
the amount invested in the subsidiaries, the Management of the Company has considered the
erstwhile shareholding pattern prior to dilution as the
Management believes that the change in shareholding is temporary in nature and the
shares pledged will be redeemed back by the Company (refer to Note 6 of the standalone
financial statement).
However, these shares have been transferred to such lenders before March 31, 2023. We
have been informed that the lenders have not sold any of the shares invoked and
consequently have not made any adjustments to the loan outstanding. Accordingly, the
Management believes that it is not possible to attribute any sale value to the invoked
shares. Consequently, the impact of the said transfer on the book value of invoked shares
on the standalone financial statements cannot be ascertained.
Reply: Management believes that the change in shareholding is temporary in nature
and the shares pledged will be released back to the Company. Since there is no
marketability for the shares invoked management is unable to estimate the impact.
3. The Management of the Company has determined that no impairment is required to be
recognized on its investments in subsidiaries, associates and joint ventures with a
carrying value of INR 1,865 Crore as at March 31, 2023, as required by Ind AS 36,
Impairment of Assets', particularly consequent to developments during this period
(as detailed in Note 40 of the standalone financial statement). Consequently, the value of
investments held by the Company in a subsidiary, which is the holding company of this step
subsidiary, is required to be assessed for impairment. We have not been provided with the
indicators used and the assessment performed by the Management in not considering
impairment in respect of its subsidiaries, associates and joint ventures. We are therefore
unable to comment on whether the value of investments recognized in the standalone
financial statement is appropriate.
Reply: The valuation of these investments for assessing impairment remains to be
done.
4. Attention is drawn to Note 14 of the standalone financial statement, wherein
instances of noncompliance with certain debt covenants including interest & principal
repayment defaults have been described. We also draw attention to the fact that the
Company has not obtained the balance confirmations on loans from lenders. In the absence
of adequate and sufficient audit evidence to establish the amounts payable to the lenders,
we are unable to provide our opinion on the correctness of these amounts reflected in the
standalone financial statement and also on their consequential impact including potential
tax liabilities. We have been informed that during the year certain lenders have exercised
their right to recall the loan and some lenders have initiated legal action to recover
dues. However, in the absence of the adequate evidence, we are unable to comment on the
consequential adjustments that might impact this Statement on account of non-compliance
with debt covenants.
Further, in view of the loan recall notices, legal disputes and pending one-time
settlement with the lenders of the Company, the Management has not recognised interest on
the loans outstanding as of March 31, 2023 aggregated to INR 59.97 Crores as detailed in
Note 14 of the statement. As the loan recall letters provided by the lenders requires
payment of interest and penal interest, non-provision of such interest is not in line with
the accrual concept of accounting.
Reply: Management is following up with lenders to get the balance confirmations.
This will be taken care of during one time settlement process. There have been certain
covenant breaches with respect to borrowings taken by the Company from various lenders.
Such covenant breaches entitle the lenders to recall the loan. Some of the lenders have
exercised their right to recall the loan and one of the lenders has initiated legal
process to recover the dues.
5. The Statement has been prepared by the Management and Board of Directors using the
going concern assumption (Refer Note 38 of the standalone financial statement). The
matters detailed in the above paragraphs may have a consequential implication on the
Company's ability to continue as a going concern. We are therefore unable to comment on
whether the going concern basis for preparation of the standalone financial statement is
appropriate.
Reply: These standalone financial results for the quarter and year ended 31 March
2023 have been prepared on a going concern basis in view of the positive net worth of the
Company amounting to Rs.30,644 million as of 31 March 2023, significant value in
diversified portfolio of investments held in subsidiaries / joint ventures / associates,
established track record of the Company to monetize the group assets as demonstrated by
sale of stake in Mindtree Limited, sale of Global Village Tech Park owned
by its wholly-owned subsidiary Tanglin Developments Limited , sale of stake in
Way2Wealth Group entities profitable resorts operations and consequential ability to
service the obligations.
Emphasis of Matter
6. Attention is drawn to Note 41 of this statement wherein a final adjudication order
dated 24.01.2023 has been served on the company under section 11 (11(4), 11(4A), 11B and
11B ( of the Securities and Exchange Board of India Act, 1992 read with Rule 5 of SEBI
(Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 by SEBI imposed with a
total monetary penalty of Rs.26,00,00,000 (Rupees Twenty-Six Crore) under Section 15HA and
Section 15HB of the SEBI Act, 1992 respectively on account of violations of provisions of
Section 12A(a), (b) & (c) of the SEBI Act, 1992 read with Regulations 3(b), (c) &
(d) and 4(1) of the PFUTP Regulations as stated in Para 59 and 60 of its order relating to
the advances to MACEL by the subsidiaries of the Company and in respect of which no
provision for the liability has been considered in the accounts.
The order further directed the company to appoint a law firm, of standing and repute,
within 60 days of the order to take all necessary steps for recovery of entire dues from
MACEL and its related entities, along with due interest, that are outstanding to the
subsidiaries. SEBI further directed the company to file a quarterly report with NSE / CDEL
Board, detailing the progress in the recovery process. The tenure of the law firm
appointed in terms of sub-para (b) above shall be until the lapse of three months from the
date of conclusion of three annual general meetings of CDEL, held after passing of this
order or till the dues are recovered, whichever is earlier.
The company appealed against the above order dated 24th January 2023 to the Hon'ble
Securities Appellate Tribunal (SAT) which granted stay only on the imposition of penalty.
Reply: The auditors has emphasized a factual matter which does not require any
accounting adjustments.
7. We draw attention to the Note 39 of the Standalone Financial Statement, wherein the
Company has stated that Corporate Insolvency Resolution Process has been initiated in NCLT
against one of its key step-subsidiary, M/s. SICAL Logistics Limited (SLL), pursuant to
which a final resolution plan has been received vide order dated 09.12.2022. As per the
said order read with the approved Resolution Plan, Nil payment is payable
against the amounts due to related parties of SICAL. Under the above circumstances the
company has written off the amount due from SICAL of Rs.0.14 crores.
Reply: Impact already considered in Financial statements, the auditors have
emphasized a factual matter.
8. We draw attention to Note 10 of the standalone financial statement, detailing facts
relating to the sale of Way2Wealth Securities Private Limited and its certain
subsidiaries. Based on the sale agreement, Rs. 4.63 Crore is receivable by the company in
form of preceding year's tax refunds and SEBI deposits from the purchaser (Shriram
Ownership Trust) in form of reimbursement, subject to realisation. Further a sum of Rs.
0.77 Crore has been withheld by the purchaser per the agreement.
Reply: The auditors have emphasized a factual matter. The above are as per
agreement with the party
9. As detailed in Note 37 of the standalone financial statement, the Company for the
year 2019-20 has filed an application seeking a onetime exemption from registering itself
as a Non-Banking Financial Company (NBFC) as required by Section 45-IA of the Reserve Bank
of India Act, 1934 and other related provisions. As at the date of this Statement a
response from the Reserve Bank of India is awaited. In the absence of such exemption, we
are unable to comment on the compliance with the aforesaid regulations and consequential
impact, if any on the standalone financial statement.
Reply: Impact already considered in Financial statements, the auditors have
emphasized a factual matter.
Risk Management and Assessment:
The Company is exposed to various risks considering the diversified parameters
according to the different major business sectors of the Company that is coffee business,
and resort business. The Audit Committee oversees the area of financial risks and
controls. Major risks identified by the business and functions are systematically
CDEL_2022-23 DflSI
addressed through mitigating actions on continuing basis. The Company has incorporated
sustainability in the process, which helps the Board to align potential exposures with the
risk appetite and highlight risks associated with chosen strategies.
Details in respect of frauds reported by Auditors under Section 143(12):
There was no instance of fraud during the year under review, which required the
Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12)
of the Act and the rules made thereunder.
Statutory Disclosures:
None of the Directors of your Company are disqualified as per provisions of Section
164(2) of the Companies Act, 2013. Your Directors have made necessary disclosures, as
required under various provisions of the Act and SEBI (Listing Obligations and Disclosure
Requirements) Regulation, 2015.
General Disclosures:
a) Buy back of securities:
In accordance with Section 68 of the Act, the Company has not bought back any of its
securities during the year.
b) Sweat Equity:
The Company has not issued any Sweat Equity Shares under the provisions of Section 54
of the Act.
c) Bonus Shares:
In terms of Section 63 of the Act, the Company had not issued Bonus Shares during the
year under review.
d) Employee Stock Option Plan:
Pursuant to the provisions of Section 62 of the Act, the Company has not provided any
Stock Option to the Employees of the Company.
Appreciation:
The Board acknowledges and places on record its' appreciation for the contributions and
hard work of Chief Executive Officer, Chief Financial Officer, Company Secretary &
Compliance officer and their team specifically in the last 4 years for continued
operations and effective interaction with all stakeholders and statutory agencies.
Acknowledgement:
The Directors would like to express their gratitude towards the Company's employees,
customers, Banks and institutions, investors and academic partners for their continuous
support. They also thank the concerned government departments and agencies for their
co-operation. The Directors appreciate and value the contribution made by every member of
the Coffee Day' family.
Place: Bangalore |
For Coffee Day Enterprises Limited |
Date: 30th May 2023 |
Sd/- |
Sd/- |
|
S.V. Ranganath |
Malavika Hegde |
|
Interim-Chairman & |
Whole-time Director |
|
Independent Director DIN: 00323799 |
DIN: 00136524 |
|